The Financial Services Council (FSC) will seek an extension to the federal government’s Corporations and Markets Advisory Committee (CAMAC) inquiry into the management of charitable trusts in Australia.
The inquiry must ensure the management fees paid are all regulated and transparent, the FSC stated.
“Currently there are hundreds of millions of dollars of charitable funds which are managed by unlicensed professional trustees, who are not regulated under the Corporations Law,” said FSC senior policy manager – trustees, Eve Brown.
The market currently operates as a dual market, where licensed trustee companies are regulated by Corporations Law but unlicensed trustees are not, Ms Brown said.
“These trustees are not subject to fee caps and some are charging more than double the legislated capped fees which apply to licensed trustee companies.”
According to the FSC, professional trustees compete in an open market for trustee appointments at the time a trust is created by an individual. “The permanency and investment expertise of a trustee are key considerations in making the trustee appointment,” the FSC stated.
Corporations Law prohibits licensed trustees from engaging in fee gouging, with fees charged in line with the legislated fee caps or under an agreement with the creator of the trust, the FSC stated. However, this doesn’t apply to unlicensed trustees.
Licensed trustee companies in Australia have been “prudently managing significant and complex charitable trust assets for more than one hundred years”, the FSC stated.
“Regulation around fee levels and disclosure must be applied to all professional trustees to ensure transparency and consistency in the industry,” Ms Brown said.
Ms Brown described the CAMAC inquiry as a “positive first step” towards modernising the charitable trust sector following the introduction of the national trustee legislation in May 2010.
“Because there’s no public information about how much money is held in unlicensed trusts … there’s a whole segment of the market being overlooked in this inquiry,” Ms Brown told InvestorDaily.
“Now is the appropriate time to look at how fees should be charged by all professional trustees, so consumers can compare apples with apples. If fee caps will continue to apply to one part of the professional trustee market, why shouldn’t they apply to all professional trustees?” she asked.
